Invesco unveils new Japan and Pacific Universal Screened UCITS ETFs
Invesco has added to its ESG ETF offering with two new funds focused on listed companies in Japan and the Pacific ex-Japan region tracking the performance of customised versions of MSCI ESG Universal indices.
The Invesco MSCI Japan ESG Universal Screened UCITS ETF and Invesco MSCI Pacific ex Japan ESG Universal Screened UCITS ETF use the methodology adopted by Invesco’s existing range of MSCI ESG Europe, USA and World equity products, excluding controversial business practices and applying a “ESG momentum” factor to increase exposure to companies identified as actively improving their ESG profile.
Invesco said the indices are constructed from their parent MSCI index by initially excluding any stock involved in controversial, conventional or nuclear weapons, civilian firearms, oil sands, thermal coal, tobacco or recreational cannabis.
Companies are then removed from the index if they have faced “severe controversies” over ESG issues in the past three years or have a very low MSCI ESG score, with the remaining stocks reweighted by the product of their ESG scores, ESG trend scores and market capitalisation.
Chris Mellor, head of EMEA ETF equity and commodity product management at Invesco, said: “Different investors will often vary in their objectives, and this is most evident in the ESG space. Generally speaking, the more you exclude from an index, the more likely the performance will deviate from the base index.”
Mellor said that this is not acceptable for all investors, and that many want to reduce their portfolio’s carbon footprint and improve other ESG characteristics, while at the same time maintaining their overall risk and expected returns.
“We designed these ETFs to provide investors with materially significant ESG improvements for their core equity exposure,” he added.
The two new ETFs each have an ongoing charge of 0.19%.
“Our suite of MSCI ESG Universal ETFs offers investors low-cost tools to construct diversified equity portfolios. We will continue building out our ESG offering in response to market opportunities and driven by investor demand,” Gary Buxton, head of EMEA ETFs and indexed strategies at Invesco, said.
According to figures published earlier this month by TrackInsight, ESG ETFs were the highest growth sector in the global ETF market, achieving 223% growth over 2020, with the Invesco Solar ETF and Invesco WilderHill Clean Energy ETF the two top-performing ETFs globally in USD.